Short-Term vs Long-Term Rentals: The Numbers (2026)

Two investors buy the same house on the same street, put the same money down, and sign the same loan. One rents it on a twelve month lease. The other furnishes it and lists it by the night. The nightly operator will almost always collect more revenue. Collecting more revenue is not the same as making more money.

This post runs short-term vs long-term rentals side by side on one property, with the same price, the same loan, and October 2026 financing. By the end you will know which line items actually change, how to calculate the occupancy rate where the short-term version stops paying for itself, and the six errors that make this comparison come out wrong.

What actually separates the two strategies

A long-term rental is leased for a year or more to one tenant who brings their own furniture and usually pays the utilities. You collect twelve checks, you handle repairs, and your revenue risk is a vacant month between tenants.

A short-term rental is leased by the night. You supply the furniture, the linens, the internet, and the utilities. You collect a few hundred smaller payments, you coordinate a turnover between each one, and your revenue risk is an empty shoulder season. The asset is identical. The business attached to it is not.

The tax treatment can differ too. According to IRS Topic No. 415, if you use the property yourself for more than the greater of 14 days or 10 percent of the days it is rented at a fair rental price, it counts as a residence, expenses get split between personal and rental use, and deductions are capped at gross rental income. A long-term lease makes that question disappear. A nightly rental you also use for a few weekends does not, and several of the landlord tax deductions most investors miss change shape when the rental period gets short.

The formula for comparing short-term vs long-term rentals

Both strategies reduce to the same equation. Only the inputs move.

Annual Net Cash Flow = Effective Gross Revenue minus Operating Expenses minus Annual Debt Service

Effective gross revenue is what actually lands in the account. For a long-term rental it is monthly rent times twelve, less vacancy. For a short-term rental you build it from two numbers instead of one:

Short-Term Gross Revenue = Average Daily Rate × 365 × Occupancy Rate

Operating expenses are everything you pay to keep the property producing, before the mortgage. This is where the strategies separate hardest. The long-term version has six or seven line items. The short-term version has nine or ten, several variable, and one of them is the furniture wearing out.

Annual debt service is principal and interest only. Taxes and insurance belong in operating expenses, even if your lender escrows them. Double-counting them is the most common error across the seven numbers every rental property analysis needs.

Worked example: one house, both ways

Same house, same financing, two business models. The loan uses the Freddie Mac Primary Mortgage Market Survey 30-year fixed average of 7.28 percent as of October 1, 2026. Shared inputs:

Purchase price: $285,000
Down payment, 30 percent: $85,500
Closing costs: $7,000
Loan amount: $199,500 at 7.28 percent, 30-year fixed
Monthly principal and interest: $1,365
Annual debt service: $16,380
Property tax: $2,500

Long-term scenario, leased at $2,450 a month:

Gross rent: $2,450 × 12 = $29,400
Vacancy at 5 percent: $1,470
Effective gross revenue: $27,930
Property tax: $2,500
Insurance, standard landlord policy: $1,700
Maintenance at 5 percent of gross: $1,470
Capital reserve at 5 percent of gross: $1,470
Property management at 8 percent of effective gross: $2,234
Admin and misc: $300

Operating expenses total $9,674. Net operating income is $27,930 minus $9,674, or $18,256. Cash flow is $18,256 minus $16,380 of debt service. Long-term annual cash flow: $1,876.

Short-term scenario, $180 average daily rate at 65 percent occupancy, which is 237 booked nights:

Gross revenue: 237 nights × $180 = $42,660
Platform fees at 3 percent: $1,280
Co-host at 10 percent of gross: $4,266
Maintenance and capital reserve at 8 percent of gross: $3,413
Property tax: $2,500
Insurance, short-term rental policy: $3,400
Utilities: $3,300
Internet and streaming: $900
Supplies and consumables: $1,100
Furnishing replacement, $22,000 over five years: $4,400

Operating expenses total $24,559. Net operating income is $42,660 minus $24,559, or $18,101. Cash flow is $18,101 minus the same $16,380 of debt service. Short-term annual cash flow: $1,721.

The nightly rental brought in $13,260 more gross revenue and finished $155 behind on cash flow. It also required $22,000 more cash to start, because somebody had to buy the beds. Cash invested is $92,500 long-term and $114,500 short-term, so cash-on-cash return is 2.0 percent versus 1.5 percent. The strategy that grossed 45 percent more earned a lower return on more money and far more work.

Find your breakeven occupancy before you buy furniture

The useful question is not whether short-term beats long-term. It is how full the calendar has to stay before it does, and you can solve for that directly. Fixed short-term costs above total $15,600: property tax, insurance, utilities, internet, supplies, and furnishing replacement. Variable costs run 21 percent of revenue, leaving 79 cents of every booked dollar.

To match the long-term version’s $1,876 of cash flow, the short-term operation needs ($1,876 + $15,600 + $16,380) ÷ 0.79, or $42,856 of gross revenue. At a $180 daily rate that is 238 nights, or 65.2 percent occupancy. The example assumed 65 percent, which is why the two land so close. Drop to 58 percent and the short-term version loses money. Hit 75 percent and it pulls clearly ahead.

That is the honest answer: the comparison turns almost entirely on occupancy, the input you control least and have the worst data on. Anyone who quotes a short-term rental return without naming an occupancy assumption is guessing. The complete guide to rental property analysis covers how the rest of the metrics stack together, and cap rate is the better tool for comparing this property to others on the market rather than two strategies on the same one.

6 mistakes that make this comparison come out wrong

Comparing gross revenue instead of cash flow. A nightly rental that grosses 45 percent more can still cash flow less. Gross revenue is the number operators post online because it sounds best. Fix: compare the bottom line of each scenario and nothing above it.
Using a peak-season daily rate as the annual average. The best three weeks do not represent the other 49, and blending them inflates revenue badly. Fix: build revenue month by month, with separate rates and occupancy for peak, shoulder, and off season.
Leaving furnishings out of cash invested. Furniture, linens, kitchenware, and the smart lock are real capital, and in the example they are 19 percent of the cash in the deal. Fix: add the full furnishing budget to cash invested, and reserve for replacement in operating expenses.
Treating your own labor as free. Someone answers the midnight message about the thermostat and turns the unit over between a Sunday checkout and a Monday check-in. If that someone is you, the strategy is not more profitable, it is paying you an undisclosed wage. Fix: charge management at market rate in both columns, then decide whether you want the job.
Carrying over the long-term insurance quote. A standard landlord policy generally does not contemplate nightly commercial occupancy, and the policy that does costs more. Fix: get a written quote for the actual use before you underwrite, not after you close.
Assuming today’s rules are permanent. Permit caps, licensing, occupancy limits, and lodging tax rates are set locally and get revised. Fix: confirm current rules with the city or county, write the assumption into the model, and test the deal as a long-term rental if the permit goes away.

Your comparison checklist

Pull three to five comparable long-term lease rates at the same bedroom count, and take the middle, not the top.
Pull nightly rates and occupancy for five comparable active listings within a mile, and record the month each came from.
Build both scenarios in one spreadsheet on a single shared financing block, so the loan is identical in each column.
Get written insurance quotes for both uses, separately.
Total the furnishing budget room by room, and put it in cash invested rather than expenses.
Charge management at market rate in both columns even if you intend to self-manage.
Solve for breakeven occupancy, then compare it to what those listings actually achieved last year.
Confirm licensing and lodging tax rules with the city or county governing the address, and date the note.

Run your own side-by-side

The comparison is not hard arithmetic. It is discipline applied before you commit, exactly when most investors are least inclined to do it. Our free calculators will get you through a first pass on either strategy, and if you want both columns built on a specific address with your own financing and comparables, book a free 20-minute consult and bring the numbers you have.

Both strategies work, for different properties, in different markets, for owners with different tolerance for being on call. The model will not tell you which kind of owner you are. It will tell you what each version costs, and that is the part people skip.

Simply Spreadsheets helps real estate investors and small business owners make confident decisions with clean, reliable numbers. Founded by Erin Onsager, a fractional CFO with more than 20 years of finance experience, the firm builds custom spreadsheets, financial models, and analysis that turn raw data into clear answers.